China’s consumer price index moved back into positive territory in December, raising hopes that the country’s economic recovery will further bolster demand at a time when core inflation remains weak, reported the Financial Times.
Core inflation, which excludes food and energy prices, fell to 0.4% year-on-year in December — lower than at any point since the coronavirus outbreak began and its weakest level since early 2010.
Persistently low levels of inflation have created a conundrum for policymakers as other areas of the economy continue to heat up. The People’s Bank of China cut benchmark lending rates last year, but the government has since moved to constrain the property sector, said the FT.
“With economic activity set to remain strong and underlying inflation likely to rebound, we think the PBOC will tighten policy this year,” said Julian Evans-Pritchard, senior China economist at Capital Economics. He added, however, that consumer prices might return to deflation in coming months on the back of sharp rises in pork prices last year.